Boom! Shake the room, Fire Nation. JLD here, and welcome to Entrepreneurs on Fire, brought to you by the HubSpot Podcast Network, with great shows like The Shake-Up. Today, we'll be focusing on why non-food franchise opportunities are resonating with so many entrepreneurs.
And to drop these value bombs, I have brought John Ostenson into EO Fire Studios. John is a consultant, owner, investor, and author specializing in non-food franchising. He draws on his experience as a former Inc. 500 franchise president and multi-brand franchisee and serving his clients.
And today, we'll be talking about why franchising is on fire, the pros and cons, because of course there are. We'll also be talking about the financial side of franchising and so much more when we get back from thanking our sponsors. Are you looking for a proven business coach who has helped thousands of entrepreneurs just like you to increase their profitability by an average of 104% per year, all for less money that would cost to hire a full-time minimum wage employee? Schedule your free consultation today with Clay Clark, a former small business administration entrepreneur of the year, at thrivetimeshow.com slash fire.
John, say what's up to Fire Nation, and share something that you believe about becoming successful that most people disagree with. What's up, Fire Nation? Excited to be here. You know, becoming successful, so oftentimes I find that people feel like you have to have all the facts when you're analyzing a big decision, option A versus option B.
What I found in my life and in the lives of others, if you start moving towards one or the other, very oftentimes out of left field comes option C. And so, really, activity breeds activity. That's a motto that I live by. Get off the sideline, get in the game, and when you do, doors open.
And Fire Nation, by the way, you're not the type of person that's not in the game if you're listening to this podcast, because you're consuming the right content from the right people. You're being inspired by greatness. Take action and never stop. Now, John, I do want to talk about what we're focusing on today, which is non-food franchise opportunities.
And I want to call a spade a spade. I mean, franchising right now is simply on fire, and we're talking especially the non-food side of things. So, who is buying these non-food franchises, and why are they doing it? You know, year-to-date, I've done deals with millennials, with Generation X, with baby boomers.
I mean, we're placing candidates across the board for great opportunities. And really, we see owner-operators coming from the corporate world, those in their 20s or their 40s. I think COVID has caused a lot of people to question the path they're on and realize maybe they want a little more control in their life. And maybe now's the time to scratch that entrepreneurial itch.
So, we see a lot of people going full-time. We also see a lot of what we call semi-absentee, those who want to keep their jobs, maybe put in 10 to 20 hours a week, a little side hustle. You know, of course, it always takes a little more effort than you think going in, but there are opportunities where you can get in on the side. And so, have quite a few clients doing that.
I think part of that is you've got so much cash built on the sidelines, stock markets run up, interest rates are low, only so many good real estate deals that you had. People are looking around saying, what is that opportunity that I may be missing out on? Fire Nation, opportunity abounds us. It is everywhere we look, but the reality is not all opportunity is the right opportunity to you, which is why you've got to listen and consume the right content from the right people.
I love to say my perfect mentor is always somebody who is currently where I want to be in life. And I look for those individuals to bring me there. Now, John, again, I like being truthful and transparent and open and honest with my listeners. I like to talk about the pros and the cons.
There's pros and cons to everything in life. So, share the pros, share the cons of franchising just versus starting a company from scratch. Yeah, I'd say starting with cons. The biggest one I see oftentimes is people may be too entrepreneurial.
You want to have your thumbprints all over your idea, and you're not willing to follow the system and the framework of a franchise and live within the guardrails, if you will. However, and I tell my clients that from time to time, you are too entrepreneurial. At the same time, I see a lot of people that recognize what franchising does bring to the table, and that's really an ability to start out on third base instead of first base. And, you know, it goes beyond brand as far as the benefits go.
I mean, in a lot of cases, I work with emerging brands where there may or may not be an awareness in that local market. However, when you look at franchising, really what the benefits are, you know, you've got a proven playbook in areas such as sales and marketing and operations. You've got a coach on the sidelines in that franchise work. You're not in this alone.
If you do, the more valuable their franchise is valued in their market. And while it's not entirely de-risked going franchising route, certainly it does de-risk it to some degree, partly because you have visibility going in. You're not just putting together performance on the back of a napkin. Instead, you have what's called the item 19 within the FDD, which shows here's how all other franchise owners in the system are performing.
You're the top ones. You're the lower ones. You're able to understand the numbers, and you're able to have conversations through what we call validation leading up to making that franchise purchase. You're able to actually talk to them, ask about their experience.
They can open up their books to whatever degree they're willing. And so you really go in eyes wide open. And finally, fifth, I would say, you know, the benefit would be that exit value. The Rinker School of Business recently did a study of over 2,000 businesses looking at those that are franchised versus those non-franchised on somewhat of an apples-to-apples comparison looking at industries and sectors.
And what they found over 10 years, those 2,000 companies, franchise businesses actually traded at a one-and-a-half multiple of the non-franchised counterparts. So, you know, there definitely is a tangible value that others see as far as retail value as well. Again, I hope you can see why we bring the top experts in every industry to talk the talk, because these are people who are currently where you want to be if this is an area that you're of interest in. And so let's talk about these sectors, outside of food, of course, that are especially and specifically on fire right now.
Like, what are you seeing that is just absolutely crushing it, John? You know, from a very high level, I think of these businesses really in a quadrant. You've got your simple retail, your complex retail, your B2C services, your B2B services, and some concepts kind of straddle between two or more sectors. However, you know, we're seeing a lot of interest in, you know, areas that have a lot of macro trends going forward.
You know, you've got the aging population. So, you know, anything senior related, you've got a huge amount of attention being given to children and education, especially coming out of COVID. That's a hot area. Anything where technology has a large component of the business, you know, health and wellness and fitness.
Property services has been really hot over the past year. It's deemed an essential service in a lot of cases. And then you've got professional services, automotive. You know, really over the past year, if I could characterize the trends that we're seeing, sexy is, non-sexy is the new sexy.
You know, people are loving the businesses like dumpsters or driveways or pool cleaning or, you know, I think of like an oil change concept I've got a lot of clients looking at right now where they use prefabricated buildings and they use unused parking spaces in a landlord's shopping center. Well, they love that additional revenue stream that the landlord does. It's just a great setup. And so it's kind of those one-off concepts, you know, car washes.
People are eating that stuff up right now versus some of your more traditional like food concepts that people would think of when you see franchising. We do see fitness coming back. Obviously, that did take a hit during the COVID era. You know, but I see other concepts like I've got a couple of clients.
I did a deal recently in New Jersey for the entire state of a brand that does IV drips that boost immunity at the cellular level. You know, they fight free radicals and reduce heavy metals and blood. So, you know, there's some neat businesses out there that would not be on your radar. In fact, I'd say probably over 80% of my clients end up going with a brand and a concept and even an industry that they never would have thought of and certainly was not on their radar.
Wow. And I love that phrase, Fire Nation. Non-sexy is the new sexy. I mean, think dryways, think pool cleaning, think non-sexy, but think essential.
These are essential services. These are services that are going to be needed and will be around for the foreseeable future for all the obvious reasons. So I do love that. Non-sexy is the new sexy.
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So, John, we're back, and I really want to do a deep dive now into the financials of franchising. I mean, I think a lot of people don't really understand why franchising makes so much sense for somebody that's thinking about potentially doing a startup versus just jumping right into franchising. I mean, there's a lot that goes into it. Break down these essentials of financials.
Yeah, and I'm sorry by saying, you know, again, franchising isn't right for everyone, but I do think anyone that's considering business ownership or businesses as an investment should at least consider franchising and look into it to see if it's a fit. On the financial side, you know, I love talking about this area because, again, you have visibility going in. Nothing is a sure thing, but you do have what's called the Item 7 within the FDD or Franchise Disclosure Document, which every franchise system has because they're regulated by the FTC and so they're required to. But in that Item 7, the franchise already gives the range, the investment range.
And it's usually a pretty wide range because, you know, things can change by market. But ultimately, it includes your franchise fee. It includes any build-out costs that you may have if it's a brick-and-mortar concept, marketing out of the gate, you know, your legal and set-up costs, you know, all those little pieces, maybe your systems and technology. It also includes typically working capital for three to six months.
They build that into that range. And so when you look at that Item 7 number, which is what I quote off of, I mean, there are a lot of opportunities out there where it might be a single territory, let's say, that's not brick-and-mortar, for as low as $100,000 all in. And then certainly you range up to $500,000 plus, $500,000. Most of the deals I do, I'd say, average between the $150,000 and $250,000 range.
And that might be for two or three locations where you start out opening up one day one and then you open up the second one. You have that protected territory where you open up maybe 12 months later and the next one 24 months later. So very common. It's what we call a multi-packed franchising common for people to buy in that way.
But from a funding standpoint, someone may say, well, gosh, even if it's on the low end, let's call it $150,000, how do I fund that if I don't have the cash sitting on the sidelines? Well, there's multiple ways. Obviously, the SBA loves promoting small businesses. So we work with some great partners on the SBA loan side.
There's what's called the ROBS program where if you have retirement funds sitting in your 401k or IRA, there's a way to roll it over. We don't have the tax impact. We've got some great partners that set clients up with that. And then there's one I'm really excited about, the portfolio loan.
So for those that have maybe $150,000 in non-retirement accounts, they're able to tap into their portfolio and not have to liquidate anything, but they can use that as collateral and take a portfolio loan, which acts as a line of credit for as low as 3.5%, 4% interest. And so it really is a great vehicle that a lot of my clients are latching on to. So that's on the cost side. On the fun side, on the investment side, what potential is, I see the margins oftentimes in the 20% to 50% range.
And it really raises people's eyebrows when they recognize what can be made, maybe not in year one, but once you're fully developed, let's say year two, year three, you can really get some attracting operating margins on the bottom line. In addition to that cash flow, a lot of people think, oh, I'm just buying a job. No, you're also building an asset that will have exit value down the road, in most cases, typically for multiple times when you pay for it out of the gate. So you're building an asset along the way.
And then obviously, as most of your audience knows, if you're a business owner, it is different than being, let's say, in the corporate world, W2 employee, in that you can also write off expenses along the way. So you really have to take all three of those considerations in when you're analyzing salary versus business ownership. Wow, Fire Nation, that was a basic master's level class on the financials of franchising. And of course, John is a specialist when it comes to this stuff, so you are learning from the best.
And John, I want to really focus right now on how you help specific clients choose the right franchise for their situation. You have a very dialed-in process. You've been doing this for a long time. You've been doing a lot of success stories, which actually, by the way, I think would be pretty cool to move into next would be maybe share one of those success franchise stories.
You don't have to say the specific franchise or name if you want to keep that quiet or private. That's totally cool. But talk to us about how you specifically help those clients, your clients, select the right franchise for their situation. Absolutely.
And I'll start by saying I've been in the shoes of many of your listeners. I'm a listener myself. And I'm a former corporate refugee. I had a great run in the corporate world where I spent most of my career.
But then I had the opportunity to go to a smaller private company, step in, serve as president of Shelf Genie, and I was a national franchise system. And that's really what opened up my eyes to the life of a franchisee, really outside of food. And I got to support franchise owners on a day-to-day basis, see what works, see what didn't. And long story short, I ended up partnering with the founder of Shelf Genie, and we are now multi-brand franchisees ourselves.
And we've got some good people to run those for us, so we're not involved on the day-to-day aspects of the business, which allows me to have my consulting practice. But, you know, so I bring that perspective of the former franchisor, now multi-brand franchisees. I've been in their shoes. I'm also that corporate refugee.
So I love trading stories with clients. But our process is really streamlined because if you go out there and start doing some Googling today, you're going to be overwhelmed. There's over 4,000 franchise brands in the U.S. You know, for us, we have vetted those down to roughly 300.
These are brands that, you know, they're at different stages of growth. Some may have 500 locations. Some may have five. But they have some key components.
The leadership team, the profit model. They've got a unique niche. We're proud to represent them, put them in front of our clients. And with these brands, the way I work with clients, first off, it's an entirely free process.
I get paid by the franchise owners on the back end. None of that gets passed on. The franchise fee is the franchise fee. So it's really a sales and marketing expense for the franchise owners.
So entirely free for my clients. But we go through a process where I hop on call. We'll do a brief introductory call, and then after that, I'll have them fill out a questionnaire. And we really dig into understanding, you know, how much time do they have to put into the business?
And, of course, what can they invest? You know, what's their financial setup today? We talked through that. And ultimately, I bring them five or six opportunities that are available in their local market.
They kind of check the boxes of the criteria that we discussed for their review. We get on a Zoom call. We look at the websites. We talk through the back end of the businesses together.
And then we try to narrow this down to two or three to really dig in and get off the sidelines, get in the game. Let's start having conversations. And it gives you some points of comparison as you talk to these franchise owners. They take you through a very streamlined process on their end of presenting the brand of the FDD and letting you talk to other franchise owners, ultimately culminating what's called Discovery Day.
But, you know, all through that process, I'm holding my client's hand, helping them figure out the funding side and the right resources, getting them plugged in with the franchise attorney at the right point, and really serving as a sounding board and holding their hand through it. So I love what I do. I love playing matchmaker. I can cite so many success stories.
I want to pick just a couple. You know, I've had a few where I'm 41 years old. You know, I've had quite a few clients at that same stage of life that, you know, were wealth managers and they jumped into, let's say, the dumpster business, something just totally out there. And in some cases, they even moved their family.
In most cases, they stayed where they were and utilized that local network, got plugged into the chain of red commerce, sponsored the Little League baseball team. You know, they love kind of exercising these muscles they never got to when they were wealth managers or in corporate world. Wow, Fire Nation, as you can see, there's a plethora of opportunities, and there are people out there, like John, whose job it is, whose career it is, to help you through that process. So, John, here's what I want to do as we kind of start to wrap this up here.
Give us the one key takeaway that you really want to make sure Fire Nation walks away with when it comes to this topic about non-food franchise opportunities. And then give us... Just the way that we can connect with you, any call to action that you have, share with us now and no one say goodbye. Yeah, you know, for many out there that are considering business ownership or maybe you're already a business owner and you're looking to diversify your portfolio or maybe looking at a complimentary type business to what you're currently doing, you know, franchising is definitely worth considering.
And, you know, we're just seeing unprecedented levels of growth and interest right now, which is a lot of fun. It's really competitive too. You know, a lot of times we have candidates fighting over the same territories for certain brands. But ultimately, in a nutshell, you know, it's my belief, and I've seen it firsthand, that franchising offers a better path to business ownership for many.
And really, there exists a wide world of opportunities that many don't have on their radars. Any ways that we can connect with you, any calls to action you have for us today? Absolutely. We'd love to connect with any listener out there.
Let's hop on a 10, 15-minute call, get the conversation going. You know, you can connect with me at FranBridgeConsulting.com. My email address is John, J-O-N, no H, J-O-N at FranBridgeConsulting.com. We'd love to get in contact.
Sign up for our email distribution list on our website, if nothing else, but we'd love to get the conversation going and see if I can help you in any way. Absolutely love it. Wow, Fire Nation, what an offer. I mean, John said, shoot him an email.
He'll jump on a 10 or 15-minute call. You can tell him your situation, and he will walk you through the process, the opportunities that you have, and you'll be talking to this individual that you're hearing right now who's dropping these value bombs, who is a true expert in this industry, John at FranBridgeConsulting.com. Fire Nation, that's J-O-N at Fran, like F-R-A-N, BridgeConsulting.com. Shoot him an email, jump on a call.
What do you have to lose? Let him know your situation and see the opportunities are for you today. So, John, I just want to say thank you for hanging out with me today, because Fire Nation realizes that they're the average of the five people that spend the most time with, and you're pretty cool, J-O, and I'm J-L-D, so Fire Nation, keep up the heat, and head over the EOfire.com, if you type J-O-N in the search bar, the show's page for today's episode is going to pop right up, and one more time, John at FranBridgeConsulting.com. Shoot an email, make it happen.
John, thank you for sharing your truth, your knowledge, your value bombs with Fire Nation today. For that, we salute you, and we'll catch you on the flip side. Hey, Fire Nation, today's value bomb content was brought to you by John and Fire Nation successful entrepreneurs. They accomplish big goals.
That's why I created the Freedom Journal to guide you in accomplishing your number one goal, and we're just talking 100 days step-by-step. Visit thefreedomjournal.com. Use promo code PODCAST for a $15 discount, and thank you for listening to my podcast, and I will catch you there, or I'll catch you on the flip side. Are you looking for a proven business coach with thousands of entrepreneurs just like you to increase their profitability by an average of 104% per year, all for less money that would cost to hire a full-time minimum wage employee?
Schedule your free consultation today with Clay Clark, a former small business administration entrepreneur of the year, at thrivetimeshow.com.